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IndyMac Faces Bank "Run"

by Glenn Setzer on
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After announcing on Monday that it would shutter its mortgage lending operations but continue business as a retail bank, IndyMac was hit on Tuesday by a potentially fatal blow to that part of its business as well.

Bank depositors rushed to withdraw money from the bank, even though such deposits are insured up to $100,000 by the Federal Deposit Insurance Corporation and IndyMac stock fell even further to $0.44 per share.

The company had announced that it would be terminating about half of its 7,200 employees and it has sold most of its retail mortgage branches to Illinois-based Prospect Mortgage for an undisclosed price.

With the depositors' demand for their money many analysts were predicting a sale of the entire company or a bankruptcy.

In a filing with the Securities and Exchange Commission IndyMac blamed Senator Charles Schumer (D-NY) for contributing to depositor and investor concerns. Senator Schumer had sent letters to several regulatory agencies alleging that the company might fail. His comments prompted agencies to restrict IndyMac's borrowing ability which caused the company's operating liquidity to about $1.7 billion. Senator Schumer responded, saying that the company's business practices and poor supervision caused its problems.

Reports are unclear as to whether or not IndyMac was on the FDIC's Bank Watchlist.

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Scott
on
Sounds like a State of Georgia problem.... California regulations far exceed federal standards, we don't have those problems, though abuses do exist. If the California closing and licensing standards were used nationwide, we wouldn't have anywhere nearly as many problems.
Jane
on
There is enough blame for everyone in the housing crisis. The borrowers should understand what they are getting into - ignorace is not a defense. The lenders should be held accountable for predatory lending practices, and just sound business practices. Also, the media has a hand in this too. When do you think the cable channels will pull the various shows on flipping properties. "Everybody is doing it, it is fun and you can make a ton of money" - right!
Lucy Evei
on
I am a Loan Officer working in the State of GA. I must admit I have seen some teriffying things happening to borrowers. Like for instance, the father is the builder, the wife is the realtor, the brother owns the mortgage company the daughter is the loan officer, and the very best friend is the closing attorney. The poor borrower especially if a first time buyer all she sees is a lovely kitchen and bathroom. She has no idear what she is signing at the closing table. She is not even given a chance to read the docs. she cannot tell the difference between an adjustable and a fixed rate. She is totally in the dark and taken advantage of by all of these people. I have witness these kind of business practices over and over again, and the state of Georgia let it happen. The problem in the state of Georgia begins with the board of realtors. There is a provision in the sales contract for the seller, not the buyer to dictate which attorney handles the closing. (this is unfair practics) Lucy
Larry Coltin
on
My name is Larry and I have been in the lending busines since 1976. I agree that the practices described by Lucy Evei are deplorable. Similar things are allowed to happen in California and it sickens me. I don't agree that more government regulation will help. We are alreay regulated by the DRE, Department of Corporations, Federal Reserve, HUD and more. It doesn't help and adds volumes of paperwork that makes it easier for banks to obfuscate the process, and adds burdensome expense. We need the borrower to understand more than the great kitchen in the new home. Consumer education is the key, and govenrment should work to make our population smarter. When we have to many under educated, governmentally dependent citizens, we all pay the price.
Justin
on
I think that the CEO of indymac should get hanged. the CFo should get beheaded. And all the top guys should get the elctric chair,,,,they all knew that the Bank is sinking,they could not care less for peoples money so let em bear the results
Anonymous II
on
WOW #2. If history repeats itself, just watch Bank of America go down the tubes IF they go through with the purchase of Countrywide's remnants. Wachovia will follow (remember they absorbed World Savings). Suggest we all get our money out of the banks and get the H*ll out of greenbacks the monetary system has no place to go but downnnnnn.
Ron Jenkins
on
I have been a real estate broker in the state of Georgia for 35 years and have previously been a loan officer. The ignorance exhibited in the statement by Lucy Evei on July 9 is overwhelming. It's a small wonder the housing industry is in such a shambles. Unfortunately and disgracefully, her level of knowledge is about par for the course.
Feral
on
Amazing that we have people citing the buyers as victims. Culpability for the housing mess falls to both the lenders AND the borrowers. This is a house you are buying. The single largest purchase you will make while roaming this earth. If you don't read and fully understand the terms of your loan you should expect to be swindled and ruined financially. Don't trust anyone you don't share blood with, and even then you should be cautious. People put more thought into the ramifications of buying a $50 item on the internet using their credit card than they do buying a $300,000 house. This problem wasn't caused from ignorance, it was greed and people wanting to get on the housing bandwagon. Now thousands of people trying to "get rich quick" are now trying to bail themselves out. House flippers and folks buying way over their means are now ruined, and justly so.
Mr. Sanchez
on
Why doesn't someone start taking responsibility for this mess, everyone is busy pointing fingers at loan officers, title companys, realtors and so forth. The problem starts with the investors that made the guidelines SOOO easy that a person can qualify for a loan using 3 refference letters as proof of income, or a phone call from an underwriter to human resources, cpa letters etc. Now those poor people, who really shouldnt of qualified for the homes, are being torn apart by the econmy, getting foreclosed on and no one seems to give a damn about it. The problem with the loan officers and realtors is greed. They saw an opportunity with the flexible guidelines, the ysp etc and took advantage of it... SO who is to blame?? Really, you can point fingers at everyone, but in reality, eveyone needs to start taking responsibility for their actions...
Anonymous
on
WOW. If history repeats itself, what will other customers do in other banks should the economy get worse and other banks start to downsize in a big way? Will mattresses start being the choice for cash deposits like it was in the early stages of the Depression? These are some interesting times folks. Some very interesting times!!!
Doug
on
WHAT IF........ All the people who are in trouble and are facing foreclosure start reading the contracts they sign starting now, and continuing for the rest of their lives, and carry this lesson forward without being given handouts from the taxpayers who didn't make those mistakes to "fix" these mistakes WHAT IF...... when everyone stops taking advice of a person who stands to gain financially from the advice they give you. WHAT IF...... people educate themselves and ask questions like, what will happen to me if the economy goes south and the interests rates dont stay at HISTORICAL LOWS before I finish paying off the negative amortization loan I am about to sign for (since its the only loan I can get buy a house) how about we start taking our lives in our own hands and learn one of the most valuable lesson you may have never been taught- Don't count on the government and everyone else to fix your own stupid actions
Debbye Jordan
on
Pointing fingers, throwing blame is NOT going to solve this mortgage mess. Until ALL companies are regulated and required to adhere to strict guidlines and procedures-this "mess" will continue. Being in the QC-QA end of it all-I've seen and bee given the responsibily to cure bad loans. Can't fix a broken loan or POS-it is what it is-covering it with perfume won't solve the problem. Companies and company owners MUST take full responsibility for what they allow their loan officers and employees close for whatever reasoning they alledge. Unfortunatley, the falling debri lands on many innocent people and families due to greed and corruption as in any crime. Those of us with the skillset and knowledge have seen the writing on the wall a LONG TIME ago-knew of the fallout that would occur and no one listened. NOW you are ALL listening!
ANONYMOUS ii
on
I just saw this on the news last night and honestly I am not sure what is going on, I recently got a loan from IndyMac Bank to keep my house and i dont know where i stand in all this if it effect me or not?
Miserable
on
I am writting to let all Americans know how corrupted the U.S banking system is. I have two cd accounts at Indymac. I was repeatedly told by Indymac employees that they are fully covered by FDIC. I even have something in writing from 7/8/2008 stating my funds were all insured. Yet, I just found out today that a significant amount of my funds were not covered. I worked so hard so for the money and now they are gone overnight. And the worst part about it was, I tried to add joint account holder or beneficiary to maximize my FDIC coverage just few days before they closed, but did not do so because two Indymac bank employees on two different days told me my funds were already fully insured. I want all americans to learn from my mistake and know that their money are not safe with banks. The funds may not be FDIC insured, even if their bank tells them they are. The U.S banking system is totally corrupted. Whether Indymac bank employees lied to me intentionly or they just did not understand FDIC coverage, banks cannot be trusted.
nina
on
the federal reserve is a private corporation. It is a private corporation created for the profit of private bankers. The federal reserve controls all money and all debt. Every dollar you see is a loan by the fed with interest on it. The way the fed pays off debt is to create more debt to pay it off. The founding fathers warned us of being controlled by private bankers. research the federal reserve, money as debt on youtube or the movie zeitgeist about the feseral reserve. you think u r being bailed out by the federal reserve but really they are just making the entire country be in more debt by creating more money. when the fed makes more money that is instantly more debt. The feds have caused depressions and bank runs before. The feds and banks love bank runs etc. It makes it so the rich and elite can come in and buy everything for pennies on the dollar. learn the history of the federal reserve. You will be shocked.
jason hill
on
New York Times reported that hedge fund managers have a new champion in their effort to keep legally dodging the taxes the rest of us pay: none other than New York Senator Charles Schumer. Now you know who is Schumer's friend and why he caused the bank run on Indymac. He truly support hedge fund and private equity because they truly support him. http://www.nytimes.com/2007/07/30/washington/30schumer.html?_r=1&oref=slogin "Large Investor decided to pay a few bucks to a Senator in New York to force the issue."(Prospect Mortgage Backed By Sterling FundPrivate Equity Acquired The Mortgage Branches from Indymac before FDIC takeover) http://www.housingwire.com/2008/07/03/regulators-to-schumer-weve-got-a-whole-bag-of-shhh-with-your-name-on-it/ "And do remember that there are many investment bankers located in New York, making them pretty influential constituents of Sen. Schumer." http://www.pasadenastarnews.com/opinions/ci_9783402 "In a Sunday news conference, he said everything in his letter was already known to the public." If it was already known to the public, what is the reason for his public letter? It is contradict to what he said previouly :"I just bring private message to the public. Do not kill the messanger." What a great liar from time to time! http://www.cnn.com/2008/POLITICS/07/13/indymac.schumer/?iref=mpstoryview Same thing he did for FRE and FNM, he forced FRE and FNM to buy $145 billion bad loans last September. So his hedge fund friend could short the stock, then his private equity friend could take huge discount to acquire the properties. So obvious criminal acts, but he is still out law and do whatever to harm the American and benefit himself and his friends.
Ron
on
Our entire economic base is going down hill fast people, as long as there is profit to be made from the backs of simple americans just wanting a place to call home then there will be more of these financial messes, take away the profit from Single Family homes and I garuntee this country will be in a better place, for as Long as the greedy investors and banks have thier way we will never recover that is for certain, there are other avenues for profit, not in the single family home market. Most europeans never loose thier homes over crap such as this because they took the profit out of the mix, Now why in Hell can americans do the same damn thing,I swear we will be better off.
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